Toyota is planning a large-scale unwinding of strategic cross-shareholdings that could see banks and insurance firms sell about 3 trillion yen ($19 billion) worth of its shares, in what would mark a significant milestone in Japan’s corporate governance reforms, according to two sources familiar with the matter.
The proposed sale could total around 3 trillion yen, although the final amount may increase depending on how many shareholders agree to sell their stakes, the sources said. Toyota is aiming for the transaction to take place as early as this year, but the timing and size of the deal remain uncertain and the plan could still be abandoned depending on investor response.
The sources, who declined to be identified because the information is not public, said Toyota intends to acquire some of the shares through share buybacks, while a secondary sale to other investors is also being considered as an alternative route.
Following reports of the plan, Toyota’s shares rose about 2% in early afternoon trading, outperforming the broader market.
The move by the world’s largest automaker would represent a major step in Japan’s ongoing efforts to reform corporate governance, where regulators and the Tokyo Stock Exchange have been encouraging companies to unwind cross-shareholdings.
Such holdings — where companies own shares in one another to cement business relationships — have long been criticised by governance experts and overseas investors for shielding management from shareholder pressure. While the practice has been common in Japan for decades, it is far less prevalent in Western markets.
Although Toyota already has a policy to reduce its cross-shareholdings, it has faced criticism from investors over governance practices and has been urged to improve capital efficiency.
One of the sources said the automaker wants to demonstrate its commitment to governance reform by unwinding the strategic stakes.
The development comes as Toyota is also pursuing a tender offer for forklift manufacturer Toyota Industries, a deal that has drawn opposition from activist investor Elliott, which argues the offer is underpriced and lacks transparency.
Toyota recently extended the tender offer deadline to March 2 after failing to secure enough shareholder support.
Major Toyota shareholders include financial institutions such as Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group, as well as insurers including MS&AD Insurance Group.
Boluwatife Enome
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